Who owns promo CDs? You do, federal judge says

When I moved to Charleston, I had two huge bags full of CDs that were the result of years of record labels sending me unsolicited copies in the hopes that I'd do something with them as a reporter for the Savannah Morning News. Obviously, I never did. Anyway, I was intent on swapping them -- there must have been a couple of hundred, though I didn't count -- for an iPod at Millennium Music back when the now defunct retailer was offering its sweet deal.
But then I felt guilty.
Promo CDs were supposed to be used for promotional purposes only. I was informed by record labels that I could listen to them, I could review them, but I didn't own them. The companies did. They were merely licensing them.
A sticker on the CD (like the one above) said so loudly, authoritatively, threateningly: The company could recall it at any time (though they never did) and selling it to a used record store or on eBay was a violation of federal and state law.
It turns out I should have swapped them for an iPod after all.
A federal judge in California ruled this month that recipients of promotional CDs have the right to do whatever they want with them. U.S. District Court Judge S. James Otero said that, according to the first sale doctrine of copyright law, once copyright owners give away the item -- a CD, DVD, or book -- ownership is transferred to the recipient.
The judge said:

"The promo CDs are unordered merchandise. ... By sending the promo CDs to music industry insiders, UMG transferred title to those insiders and the promo CDs are subject to the First Sale Doctrine."

He's referring to UMG, or Universal Music Group, the largest music company in the world. It had sued a guy named Troy Augusto for copyright infringement after he sold a handful of promotional CDs, including a highly prized and hugely valuable recording of Bone Thugs-N-Harmony, on eBay.
Universal plans to appeal Otero's ruling and expects to win, according to this report by the BBC.
The Electronic Frontier Foundation (EFF), a digital rights lobby group that represented Augusto, said it was pleased with a ruling that affirmed that copyright law cannot override individual property rights:

"It was clear to the court that these CDs were the property of Mr. Augusto, and therefore he had the right to resell them," said Joseph C. Gratz, attorney with Keker & Van Nest, which worked with EFF on the case. "Copyright holders can't strip consumers of their first sale rights just by sticking a 'Not for Sale' label on a CD."

All of this verges on the absurd. Paul McNamara, of Network World, notes in his blog that the practice of sending tens of thousands of CDs to journalists, radio jocks, and CD stores inherently precludes any attempt to exercise control over them. What's obvious the everyone else, McNamara writes, also happens to be the law.
Of course, we'd never have gotten to this point -- that is, a huge conglomerate picking a fight and suing the pants off a solitary record collector with an unfortunate taste for tacky R&B -- if the music industry and UMG weren't already in a state of panic about the millions lost to illicit downloading and the near total lack of control over its products.
In the past, record labels would have let people like Augusto slide. They were making so much money, there'd be no point in a lawsuit. Times have changed. There's too much at stake now. And that there's too much at stake may suggest that something had always been wrong with the music industry.
It's just taken this long for us to see what was broken.